Shortage of Labor Claims
- The Federal Reserve Bank of Atlanta says Some Industries Encountering Worker Shortages
- Reuters talks of a World Without Labor ‘Slack’
- MarketWatch says Screaming Labor Shortage Forcing Firms to Get Creative to Fill Record Job Openings
Record Job Openings
I discussed record job openings in Job Openings Decline by 284,000 But Still Near Record Highs
In the above link I discussed fictitious measures.
Case for Fictitious Numbers
Posting job openings on the internet is cheap. This does not mean companies are actually looking to hire.
- Some companies want to investigate resumes just see what’s out there.
- Some companies prefer lower-pay foreign workers via the H1B Visa process. They post jobs with more qualifications than they really need to make a case no domestic workers applied.
- For low-pay high-turnover jobs, companies keep many jobs open because they expect quits. There were 3.6 million quits in September.
I made the claim “If there really was a shortage of 7 million workers, wages would be soaring.”
Reader Comments
- The Realist commented: “No matter how you try to explain it away, there is a shortage of skilled workers. It may be overstated, statistically speaking, but there is still a shortage.”
- Pater Tenebrarum at the Acting Man blog replied “It should be noted though that there is a skill mismatch problem it is a remnant of the malinvestment orgy attending the previous cyclical bubble iteration.”
Who is Right
All of us, in different ways.
The Realist is correct. There is a shortage, but an overstated one.
If there really was a shortage of 7 million workers, I stand by my claim that wages would be soaring.
Pater Tenebrarum made the most critical point. Let me rephrase it.
There’s Always a Perceived Shortage at the Top
Think back to 2006. Supposedly there was a shortage of Florida condos.
Alleged “Proof” was easy to find. People were lining up around the corner to enter lotteries for the right to buy a condo.
More recently, in Australia, speculative demand from China made it look like there was a shortage of houses down under. That bubble recently died and has a long way to go before it’s finished.
This time, rather than creating another enormous housing bubble, the Fed revived the junk bond market. Zombie corporations make up 15% of S&P corporations.
Cheap money finances many speculative endeavors.
Is there a shortage of skilled fracking workers? Probably, but how many of those drillers survive only because they can roll over debt?
Is there a shortage of truck drivers? Again, that’s likely. But on top of boomer demographics (millennials don’t want to drive trucks), we have an over-expansion of all kinds of franchises thanks to cheap credit.
As soon as the bubbles pop, there will not be any labor shortages, real or imaginary.
Also see Rise of the Zombie Corporations: Percentage Keeps Increasing, BIS Explains Why.
Mike “Mish” Shedlock
In the coalfields there is a shortage of skilled labor simply because most applicants can’t pass a drug screen. Blame it on massive drug use in the Appalachian region.
Depends on your definition of ‘skilled’. You’d think that fast food or retail is not skilled labor until you’ve come across the economy where I’m currently living. Entry level workers walk out of high school into good paying factory jobs. This makes a shortage of ‘skilled’ workers because all that is left are people who were just released from prison, people who don’t care (likely working at Taco Bell because they like the food, not because they need a pay check) and temp workers who cannot make it in a economy like ‘that’ for some reason of another. The shortage is so bad that they have stopped drug testing. From a fast food manager perspective ‘coming to work’ is considered a skill. Now guess how the media reports it?
Your post is very interesting and sad at the same time. If coming to work is now considered a skill our country is in trouble.
Agree regarding bond market bubble causing this cycle. WeWork and others are laddering bonds to keep the game going. The dominoes will fall worse than last time because we will see how much of this growth is also debt induced.
There is the eternally short-staffed skilled labor of us air traffic controllers…at least at N90. Who wants Long Island taxes? LOL.
and another point…
where are these companies located? dollars-to-donuts the companies complaining about labor shortages are in the HIGHEST COST cities in the US. Rational people are FLEEING those high cost regions, so yeah, maybe locate your business someplace affordable… you’ll find PLENTY of applicants.
This shit happens to me ALL THE TIME. Underwhelming offers from zero-loyalty corps. who insist that I relocate to SF or LA or Seattle. No, thank you. They couldn’t pay me enough to live/work in those cities.
The only shortage is common sense in the executive suite… they can afford to live anywhere, but the people on their payroll? Not even close. It’s laughable.
If there is problem to find workers a rational company increases the wages and benefits until it finds workers locally or entices workers to move from elsewhere in the US to where the company is OR opens another office or factory at a lower cost US state where there are more willing workers.
Without low cost illegal immigrant workforce many companies would have moved away from California years ago and based their operations in the Redpublican States between coasts so the intentional allowing of illegal immigration by politicians was also motivated by keeping California economy going.
Also California has many House seats they should NOT have since House seats are based on population and California gets more House seats even for the illegal immigrants.
Hopefully in the 2020 census there will be the question what is the immigration status of people and hopefully California will lose many House seats (they have gained because illegal immigrants being included in the population numbers before) to Republican states once the illegal immigrants are no longer counted.
The discouraging part is that we had a “Republican” “controlled” House & Senate — and they did not make the hard decisions about cutting government spending or eliminating bureaucracies. President Trump has made some steps on rolling back excessive counter-productive regulation — but he has essentially had to act on his own, without help from “Republicans”.
If Census changes result in “Republicans” regaining control of the Federal government, should we expect anything better?
You think Texas or other states dont gain seats because of illegals too? Last I checked the influx of illegals from other states into Texas was higher than those coming in from Mexico.
Texas indeed has also gained House seats from illegal immigrants. Thanks to birthright citizenship new Democrat voters are being born in Texas all the time to illegal immigrant parents and many turn 18 years old every year and start voting for Democrats.
Democrats won many of those Texas House seats this year.
Now this year Cruz barely won his Senate campaign and in 6-12 years Texas Senators will be Democrats and in 18-24 years Texas will be like California for Republicans.
Ted Cruz is lard in a suit. Texas should be ashamed.
Furthermore… every job I’ve applied for in the past 10 years has has AT LEAST 450 other applicants… labor shortage? Hardly.
Our UE rate looks low because we structurally roll the L-T unemployed out of the equation. Add those L-T UE & under-employed folks back into the UE numbers and the UE rate would be 15-20% EASILY.
There are 37 percent not employed. Some are retired and others on disability but I believe true UE is around 20%.
I call bullshit on “skilled” labor shortage.
You can’t claim a “skilled” labor shortage and then rattle-off industries like ‘retail’, ‘food service’, ‘accommodation’ & ‘social services’ as examples… gimme a break. NONE of those are “skill” industries… in fact, the reason those sectors are short is exactly because those are ENTRY LEVEL LOW PAY UNSKILLED NO-ADVANCEMENT jobs. Try working one of these jobs in an american city or suburb… rent+commute wipes out 80% of the paycheck, so yeah, there’s a shortage of slaves… go figure.
Duh.
What’s the problem? It’s a free market. These complaints by employers are perennial. Have they done anything about acquiring or training the right personnel to match their changing needs and growth prospects, or do they simply expect there to be ready to use unemployed candidates with just the right mix of skills and experience at no extra cost? Employers who do not invest in their personnel will always have trouble and complain that the market is not supplying them with the right personnel at the right price, and that it is the fault of government and educational policies, and the poor attitudes of people in the labor force. But that is not how markets work over time. You don’t get to have first access to cheap perfect tomatoes just by showing up. You either need to pay more, travel further, or plan ahead and make commitments. Optimizing price, flexibility, and future commitments is what the market is all about. Stop complaining and pretending it’s somebody else’s fault.
This talk of skilled labor shortage reminds me of the year 2000 before the DotCom bubble burst. In May of 2000 I had 4 job offers in 1 week with less than 3 years experience. One of those jobs (permanent) paid 20% more than I was making, plus a 10% hiring bonus. It meant moving, but it was worth it for professional growth.
“If there really was a shortage of 7 million workers, I stand by my claim that wages would be soaring.”
I disagree strongly Mish. Most modern companies set prices to what they think the market will bear to maximize their profits. In most non-manufacturing industries, labor is usually a high percentage of costs. So increasing wages is probably the absolute worst thing that can happen to a company.
That’s because wages are sticky, when they go up, it is almost impossible to bring them back down. And the last place you want to be stuck in a downturn is having to cut your prices to maintain market share with wages set at the top of the market.
Today, most companies have subscriptions to services that provide local wage information. So if I have an open position, I look up what that the position pays in the local economy, and I never set my pay higher than that. That helps local employers to collude to keep wage prices in line.
Secondly, you should always advertise your positions to get a bank of resumes to quickly bring people in if someone leaves. So there are definitely less open positions than their appears. But bringing in replacements quickly reminds the existing staff that no one is irreplaceable.
Finally, I can’t stress enough the importance of software automation. The more organizational intelligence you can put into software, means the less human intelligence you need in the business. And stupid is cheap.
From Financial Times today:
1.
“US student loan debt is ballooning at a dangerous rate. Total debt topped $1.5tn this year and studies suggest that nearly 40 per cent of borrowers are likely to default on their loans by 2023.”
1500 billion is quite a lot of student debt.
2.
” One recent survey found that 43 per cent of college grads are underemployed. “
Study worthless degrees and you will have trouble finding work in the field you studied.
3.
“There are plenty of MBAs who can read a balance sheet but have neither operational nor soft skills. Four-year business administration graduates are settling for low wage gigs, while $20-an-hour manufacturing jobs go unfilled because employers can’t find anyone with vocational training. “
There should be more vocational training together with companies.
4.
” Walmart Academy has trained thousands of workers, including in basic skills they should have learnt in high schools.”
So many high schools are worthless as well.
5.
“For some middle-level positions in 2015, two-thirds of employers were asking for a college degree, even though only 16 per cent of people working successfully in similar positions had them.”
So many applicants for jobs that some companies are trying to cut through the avalanche of applications by credentialism aka requiring degrees for jobs where one does not really require a degree.
Read the rest:
There is NO shortage of workers.
The issue is just that companies try to pay low wages and complain about shortage of Labor instead of increasing wages until they find all the workers they need.
The illegal immigration of tens of millions illegal immigrants has been used to lower wages in many jobs and this illegal immigration has to be stopped and those jobs have to be given to African-Americans and Hispanic-Americans and all Americans and companies need to pay them good wages.
All current illegal immigrants need to be sent back home.
The market needs to allowed to work so companies increase the wages since too high mandatory minimum wages like 15 dollars an hour lead to less productive workers not finding employment at all.
However federal minimum wage should be set at about 9-10 dollars an hour.
There might be some shortages of skilled labor and this is due to mal-investment like mal-education where students study worthless degrees and rack up huge student debts and then find no work in their field of study and end up making lattes at Starbucks with a 100k-200k student debt destroying any chances for them to start a family or save money to start a business etc.
This mal-education should be stopped by making student debts dischargeable in bankruptcy and removing all federal guarantees from student debt. This would cause all students studying usable degrees where they can find and most likely find a well paid job in the field they studied still getting student loans but those studying worthless degrees NOT getting student loans so colleges and universities have to remove places from those degree programs and charge less for those degrees and increase amount of students in those degrees where students find well paid jobs after getting their degree.
However companies like Facebook and Google and Microsoft have been abusing H1B program for years to get workers they can pay less than they would have to pay to get comparably educated Americans to do those jobs.
There should be a minimum wage of 200,000 dollars for H1B’s so companies could NOT use H1B’s to find lower wage workers and they would have to employ Americans and pay well-educated Americans in those fields more and only those H1B’s who are genuinely brilliant should be allowed to USA.
Unless a H1B is getting paid 200k then he is not really brilliant and the companies are just using him to pay less in wages and thereby increase the profit margin of the company and increase the stock price and executive compensation for the company.
The saddest example of H1b abuse was Disney forcing their IT department to train low wage Indian H1b workers that would replace most of American IT workers at Disney.
Train Indian H1B workers brought in to replace you to get a few more months where you keep your job before being fired by greedy Disney.
Disney should have been boycotted by all Americans for that blatant H1B abuse.
How do you propose that American fruit and vegetable farmers remain in business if they have to pay $50/hour? How do you propose to stop Google and Facebook from outsourcing development to India if they can’t hire H1B workers? How do you propose that restaurants, hotels, landscaping, maid service companies stay in business if their labor costs triple?
Shamrock, your argument is a strawman argument where you invent a claim and then attack the claim you yourself invented since NOBODY is saying companies and farmers and restaurants and hotels and landscaping and maid service have to pay 50 dollars an hour for employees.
All of those jobs will most likely find plenty of willing workers at 15 dollars an hour from Americans and even higher living cost states like California will find plenty of workers in those jobs at 17-19 dollars an hour.
Also for farmers there is the possible of automation so instead of attracting to USA and employing in USA 100 illegal immigrants at ridiculously low wages and pushing their healthcare costs and welfare costs to be paid by American taxpayers a farm can purchase 1-2 new machines and automate the work.
Fruit harvester machines
The machines are similar to very strong street sweepers. They are easy to use and with them the fruit harvest is really fun. They are suitable for use both at scattered fruit trees and on plantations. The picking up of apples, pears, plums and walnuts with the machine is even under the harshest conditions possible, for example in the wet mulch grass, tall grass and foliage. The machines have practice tests in knee-high, foliage and autumn damp grass and passed with flying colors.
Instead of farmers hiring on workers to do the harvest, they’ll contract with the company that has a bunch of these machines, who will sub out operators -hopefully they’ll find a few that think running a fruit picker is fun. The contractor will spread the cost/risk of fronting the capital for the machine across several farms. Basic stuff.
Many jobs at utility companies and colleges are filled only by crony hiring. The ads for jobs are simply a requirement and fake. In applying, this was admitted to me.
That is a strange graph. From 2002 to 2015, the number of hires exceeded the number of job openings by 10-30%, continuously. That creates questions about definitions and accuracy of data. And that maybe suggests the reversal to an excess of openings over hires post-2015 should be taken with a grain of salt.
The model for the last 40 years has been that those with lots of money to invest (millions for Pizza Hut franchises comes to mind) did so either with zero interest money or money from some source, and then the dollars rolled in. But this model relied on paying workers nothing to ensure millionaires stayed millionaires. Working for dismal wages and no benefits is so ingrained in the American “gig” economy that workers dont even expect anything better. Offer REAL jobs with REAL wages and benefits, likely to the detriment of the millionaire owners (poor babies), and we’ll see how many “available” workers come out of the woodwork.
Who on earth is ever going to offer anything “to the detriment of” themselves?
If people aren’t paid in accordance to the value they create, the problem is lack of competition for their services. In Pizza terms; zoning, development, licensing, permitting and other laws and regulations barring a group of underpaid Pizza Hut employees from simply setting up shop and baking Pizzas next door, calling themselves “Better than sucky Pizza Hut”, and competing to their hearts content.
Free markets ALWAYS provide the best deal. For consumers, obviously. But also for employees. EVERY SINGLE problem of employees getting systemically shafted, can be solved, very simply, by the application of more freedom. Fewer restrictions. Less hoops to jump through and “comply” with for startups. There is no exceptions to that. No “market failures.” Nor other imaginary hobgoblins.
Low skilled jobs are just that. They never had benefits or paid much more than minimum wage. They were never meant to support a family or even provide enough to support oneself comfortably. These jobs have traditionally been filled by immigrants(legal) as starting point in the american dream. Its interesting to see that those immigrants start out that way and impart work /education ethics and values to their offspring so they can do better. These low wage low pay jobs are supposed to be a stepping stone to better your life and skills. However native americans have an entitilemant attitude and expect to handed things from the govt and or “rich ” businessmen. The pizza hut owner you are referring to I bet doesn’t make millions per francise off the back of the poor workers. Thats a communist myth. Its interesting to note that over 70% of the eligble males for military duty don’t qualify. That pretty much puts your not enough pay theory in the garbage can. We have a generation of fuckups who don’t want to do shit for themselves.